Over the last year or so, triage is a term that has become closely associated with defined benefit (DB) pension transfers.

    But I'm not convinced the technique is being applied correctly. Where I take issue is where triage is considered to be part of the advice process, rather than a separate stage before the advice process begins. 

    Despite this concern, I believe triage can offer a valuable contribution to potential pensions transfer business if applied correctly.

    The origins of triage 

    Originating in the Napoleonic era, the French term 'triage' gained wide use during the First World War due to the horrific casualties that resulted from mechanised warfare. Triage was used to prioritise medical treatment.

    Not to put too fine a point on it, there was little purpose in providing medical treatment to those who were going to die regardless of medical intervention. This is the first of the three stages of triage.

    The second and third stages of triage were used to prioritise those casualties who needed immediate attention to prevent further deterioration and those casualties whose injuries, though possibly serious, were not immediately life threatening.

    There is a direct parallel here with advice and financial planning. Advisers should consider using the first stage of triage to filter potential DB transfer clients.

    For financial planning firms, DB pension transfers represent considerable professional and regulatory risk, and firms need to filter out the clients that represent too much risk. Not only that but I would recommend it should be done on the basis that:

    1. no advice is given and furthermore can be demonstrated clearly to have not been given;
    2. records are kept demonstrating that a process exists and is followed.

    This isn't about creating unhelpful barriers to advice, but ensuring you are abiding by regulation. 

    The critical stage

    The first stage must be focused on whether, in the firm’s opinion, advice should be given. Once this line is crossed, the firm has accepted all the regulatory and professional liabilities that go with it. 

    I believe it is possible to evaluate a pension transfer case without crossing the advice line, and that you can do this by building an understanding of the individual's motivation and rationale. 

    They will have many motives for considering a transfer; some valid, some not so valid, as well as perhaps misunderstandings about why they should leave a scheme. Advisers must establish the validity and veracity of these motives to decide if advice should be provided by the firm.

    It's worth obtaining the following information:

    • Understanding: The individual’s understanding of the existing DB pension scheme benefits and the aspects they would be giving up on transfer;
    • Purpose: What the individual believes is the gain in terms of flexibility vs the sacrifice;
    • Health and mortality: Known illnesses and impact on life expectancy;
    • Financial and tax: Financial needs, inheritance and tax reasons that the individual considers make a transfer viable;
    • Security: The degree of financial security in the individual’s circumstances that may mitigate the loss of guaranteed benefits;
    • Sustainability: The ability to tailor their lifestyle in the event of pension income shortfalls, as well as whether they're able to increase income through part-time employment or other opportunities;
    • Composure and regret: Considering transferring out of a DB scheme can be driven by the trust and trustees, as are the timescales. In some cases, the individual will be reacting to this third party agenda. Composure and regret at not taking advantage of this opportunity should not be dismissed as irrelevant.

    This information can form the basis to determine whether a firm might wish to cross the line into advice - with all the professional and regulatory liabilities this encompasses.

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